Why Should Credit Limit Be Imposed.Is it necessary for the company to inform the customer about its credit limit and credit terms?

In credit control or management, it is important to set credit limit for each customer. By setting credit limit, it has the following advantages:

• the firm is able to limit its credit risk or losses caused by fraud or a sudden worsening of a customer’s position.
• Having credit limit set means that modest check or no check needs to be done  and
• the firm has conducted checks, they reveal something worrying.

Next, is it necessary to inform the customer pertaining to its credit limit and credit terms.

The answer is yes. Once a company has set a credit limit and terms for its customer, it is best  to inform the customer accordingly. If we don’t one day, the  customer will find out if it results in an order being refused. By informing the credit limit, the message might be a strong one to the customer but at least the customer will then be able to understand the company’s virtues pertaining to firmness and or fairness and or friendliness.